Draft reply to Show Cause Notice being issued to traders claiming in respect of goods transport services
November, 18th 2006
Date : ..
Asstt. Commissioner of Central Excise Division,
Case :M/s. .
Sub : Reply to the Show Cause Notice Issued by Asstt. Commissioner bearing
With reference to the aforesaid notice, we would like to submit as under:
1.Admittedly . (hereinafter refer as for the sake of brevity) is not a Goods Transport Agency. ..............is paying service tax on freight paid by them in the view of Rule 2(1)(d)(v) of Service Tax Rules, 1994. As per said rule i.e. 2(1)(d)(v) of Service Tax Rules, 1994, Person liable forpaying service tax means in relation to taxable service provided by a Goods Transport Agency, where consignor or consignee of goods is.
It is clear from the language of the said rule that ..............is liable to pay service tax on services which are provided by the Goods Transport Agency.
2.Notification no. 32/2004-Service Tax dated 03.12.2004 provides exemption equivalent to 75% of the gross amount charged from the customer by goods transport agency for providing the said taxable services. Abatement is provided from the value of taxable services provided by Goods Transport Agency. Emphasis is placed on the fact that exemption is provided from the value of taxable services provided by Goods Transport Agency and not to the Goods Transport Agency.
3.Aforesaid notification reads as .exempts the taxable service provided by agoods transport agency to a customer, in relation to transport of goods by road in a goods carriage, from so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the service tax calculated on a value which is equivalent to twenty-five per cent of the gross amount charged from the customer by such goods transport agency for providing the said taxable service.. It is clear from the language of the said notification that the exemption is provided from the value of taxable services provided by Goods Transport Agency for which ..............is liable to pay service tax.
4.Notification 32/2004 has been replaced by notification 1/2006- Service Tax dated 01.03.06. The recent notification also provides the exemption from the value of taxable services provided by Goods Transport Agency. Notification No. 1/2006 dated 01.03.2006 is no different to Notification No. 32/2004 dated 03.12.2004 as discussed supra.
5.From the above discussion, it can be concluded that ..............is liable to pay service tax on services which are provided by Goods Transport Agency and abatement of 75% is available from the value of taxable services provided by Goods Transport Agency under both the notification (i.e. Notification no.32/2004-ST dt. 03.12.2004 and Notification no. 1/2006-ST dt. 01.03.2006). Thus, ..............is liable to pay service tax on services provided by Goods Transport Agency after availing the abatement of 75%, from the value of taxable services.
6.SCN issued by your goodself is based on the clarification issued by Director General Service Tax vide letter F. No. V/DGST/43-GTO/02/2005/19879, dated 30.03.2005 which is reproduced hereunder for the sake of ready reference.
In relation to abatement of 75% in the case of Transport of goods by road, Director General Service Tax has clarified that there is wide spread confusion over the applicability of benefit provided under notification no. 32/2004 dated 3.12.2004 vis--vis notification no. 35/2004 dated 3.12.2004. The matter has been examined in this Directorate and it is clarified that benefit of notification no. 32/2004 dated 3.12.2004 granting an abatement of 75% from the gross amount charged by goods transport agency for providing the said taxable service is available only in cases where Goods Transport Agency is liable to pay service tax. The benefit is not available in cases where the provision of notification no.35/2004 dated 3.12.2004 are applicable i.e. where the consignee or consignor are from one of the seven categories mentioned therein
It is true that Director, Service Tax has issued above said letter informing his views that a consignor or consignee is liable to pay service tax, the tax is payable at full rates without any abatement. However said letter dated 30.03.2005 of this office has been withdrawn by this directorate vide letter of even no. dated 11.04.2005. This is for your consideration again. DGST Letter F.No. V/DGST/43-GTO/02/2005/2740 DATED 03.04.2006. Moreover, this clarification has been withdrawn by the Board also vide its order no. F. No. B1/6/2005-TRU dt. 27.07.05. Relevant para of said order is reproduced hereunder for ready reference.
Quote Para no. 31.1
31.1An abatement of 75% in taxable service of goods transport by road is available on the condition that the goods transport agency has not availed credit on inputs and capital goods used for providing taxable service and has also not availed benefit of notification No. 12/2003-Service Tax dated 20.6.2003 (vide Notification No. 32/2004-Service Tax, dated 3.12.2004). It has been requested that in cases where liability for tax payment is on the consignor or consignee, the procedure as to how it should be confirmed by such consignor or consignee that the goods transport agency has not availed credit or benefit of notification No. 12/2003-Service Tax may be prescribed. In such cases it is clarified that a declaration by the goods transport agency in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken nor the benefit of notification No. 12/2003-Service Tax has been taken by them may suffice for the purpose of availment of abatement by the person liable to pay service tax. - F.NO. B1/6/2005 TRU dated 27.07.2005
The same views has been confirmed by the department in FAQs issued by the Chief Commissioner of Central Excise, Coimbatore Zone Third Edition dated 19.06.2006 (Published in Service Tax Review, Vol. 3 : Part 4, issued on 15th August, 2006). Relevant para of said FAQs is reproduced hereunder for ready reference.
Abatement to the extent of 75% of the gross amount charged for the service provided is admissible when the Goods Transport Agency does not avail the benefit under CENVAT Credit Scheme or the benefit under Notification No.12/2003-ST dated 20.06.2003.(Notification no. 1/2006-ST dated 01.03.2006).
In such cases, a declaration by GTA in the consignment note issued, to the effect that neither the credit on inputs or capitals goods used for provision of service has been taken nor the benefit of the Notification No.12/2003 ST dated 20.06.2003 has been taken by them, would suffice for the purpose of availment of abatement by the person liable to pay Service Tax.
The condition for exemption is to be fulfilled by Goods Transport Agency and not by consignor/consignee. Goods Transport Agency is required to show service tax separately in the invoice issued by it i.e. GTA. If it shows 2.55%, the liability of consignor/ consignee is only 2.55%. Assessment of tax and showing it in invoice is responsibility of goods Transport Agency, only payment of service tax is the responsibility of consignor / consignee. Where GTA has not shown service tax separately, the above said circular laid down the procedure for claiming abatement by consignor or consignee. From the above clarification it has been made clear beyond any doubt that benefit of abatement can be claimed by consignor or consignee subject to declaration in the consignment note by goods transport agency. ..............is in possession of relevant consignment notes showing service tax @ 2.55% or where service tax has not been shown separately in such cases declaration from the goods transport agency is available. Same are produced herewith for your kind perusal.
Thus the legal proposition and stand of the department are in favour of ... It can be easily said from above discussion that ..............has not short paid service tax thus provisions of section 73 are not applicable in this case. ..............has availed the abatement for which it is entitled to.
Further, we would like to mention that as no short payment of service tax is made by , therefore no question with regard to levy of interest and penalty u/s 75 and 76 arises.
In view of the above, you are humbly requested to vacate the above said show cause notice. We also request you to grant us a personal hearing before taking any decision in this matter